Spending on outpatient prescription drugs in the U.S. has increased at double-digit rates for the past decade and is now the third largest component of health care expenses. With drug spending rising so rapidly, many employers and insurers have adopted benefit designs to encourage less and lower cost pharmaceutical use. While some evidence suggests these measures reduce total drug spending, their impact on patterns of drug use, medication compliance and utilization of other medical services is largely unknown. Without this knowledge, health plans and their sponsors could be designing prescription benefits that reduce the costs of pharmaceuticals but increase overall medical costs. We link medical and pharmacy claims data for a wide array of employers across multiple years to the benefit designs for each employee. These data provide a unique opportunity to assess the impact of increased patient cost-sharing and recent innovations in drug benefit design on the patterns of drug use, medication compliance and medical care utilization and costs. The proposed project has four specific aims:1. To assess the impact of drug benefit design on disease-specific patterns of use.2. To examine how medication compliance varies by drug benefit plans and the extent to which these effects differ across disease conditions and level of health status.3. To estimate the impact of poor compliance on hospitalization rates, emergency room use, physician office visits, and overall medical care costs.4. To estimate how novel drug benefits and cost-sharing arrangements affect non-pharmaceutical spending. These questions are highly relevant to health plans, employers and policymakers seeking to design drug benefits that induce more rationale consumption of pharmaceuticals without restricting use of appropriate.